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examchap14 - Folk Exam Questions - Chapter 14 1. Zernoni...

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Folk Exam Questions - Chapter 14 1. Zernoni Company's net income last year was $225,000 and its interest expense was $30,000. Total assets at the beginning of the year were $1,950,000 and total assets at the end of the year were $1,830,000. The company's income tax rate was 30%. What was the company's return on total assets for the year? Solution: Return on total assets = [Net income + (Interest expense x (1 – Tax rate)] ÷ Average total assets Return on total assets = [$225,000 + ($30,000 x (1 – .30)] ÷ [($1,950,000 + $1,830,000) ÷ 2] Return on total assets = ($225,000 + $21,000) ÷ $1,890,000 = 13.0% 2. Selected financial data for Spelling Company appear below: Account Balances End of Beginning Year of Year Common stock $1,200,000 $900,000 Preferred stock 375,000 375,000 Retained earnings 555,000 225,000 During the year, the company paid dividends of $30,000 on its preferred stock. The company's net income for the year was $360,000. What is the company's return on common stockholders' equity for the year? Solution:
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examchap14 - Folk Exam Questions - Chapter 14 1. Zernoni...

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